Introduction The ๐ฎ๐ธ๐ถ๐๐ ๐๐'๐ ๐ฑ๐๐๐ถ๐๐พ๐๐พ๐๐ ๐น๐พ๐๐๐๐ (๐ฎ๐ฑ๐น) is a sophisticated technical indicator, designed to increase the profitability of lower timeframe trading. Due to the inherent decrease in the signal-to-noise ratio when trading on lower timeframes, it is critical to develop analysis methods to inform traders of the optimal market periods to trade - and more importantly, when you shouldnโt trade. The ๐ฎ๐ฑ๐น uses a blend of volatility and momentum measurements, to signal the dominant market condition - trending or ranging.
Legend The ๐ฎ๐ฑ๐น consists of a signal line that moves above and below a central zero line, serving as the indication of market regime.
When the signal line is positioned above zero, it indicates a period of elevated volatility. These periods are more profitable for trading, as an asset will experience larger price swings, and by design, trend-following indicators will give less false signals.
Conversely, when the signal line moves below zero, a low volatility or mean-reverting market regime dominates.
This distinction is critical for traders in order to align strategies with the prevailing market behaviors - leveraging trends in volatile markets and exercising caution or implementing mean-reversion systems in periods of lower volatility.
Case Study Here we can see the indicator's unique edge in action.
Out of the four potential long entries seen on the chart - displayed via bar coloring, two would result in losses.
However, with the power of the ๐ฎ๐ฑ๐น a trader can effectively filter false signals by only entering momentum-trades when the signal line is above zero.
In this small sample of four trades, the ๐ฎ๐ฑ๐น increased the win rate from 50% to 100%
Methodology The methodology behind the ๐ฎ๐ฑ๐น is based upon three components:
By calculating and contrasting two ATRโs, the immediate market momentum relative to the broader, established trend is calculated. The original method for this can be credited to the user @xinolia
A modified and smoothed ADX indicator is calculated to further assess the strength and sustainability of trends.
The โLinear Regression Dispersionโ measures price deviations from a fitted regression line, adding further confluence to the signals representation of market conditions.
Together, these components synthesize a robust, balanced view of market conditions, enabling traders to help align strategies with the prevailing market environment, in order to potentially increase expected value and win rates.
Notas de Lanรงamento
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Modified normalization logic. Added 'Dynamic' capabilities. Added 'Compressed Signal Mode'.
Notas de Lanรงamento
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Updated Dynamic Function Library. Update header name tag.
Hello, many of your indicators have solved many of my trading problems. For SVF, if I want SVF to become more responsive, do you have any good suggestions on how to set the parameters? For the three-minute trade I made, the current default parameters are a bit slow for me. Some opportunities have passed before the volatility responds to the 0 line. Thank you.
QuantraSystems
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@fangcongyonghao, Sorry for the late reply. We are currently working on an update, and we endeavor to include more timeframe-adaptive parameters.
I can let you know in the coming days once the update is published ๐ซก
fangcongyonghao
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@QuantraAI, Thanks, I look forward to your updates.
Thanks for this new indicator, I am a 1 minute and 3 minute scalper, I hope to take advantage of this indicator. I use your indicators in my chart configuration at the same time: Triple confirmation kernel regression Overlay, Triple confirmation kernel regression Base and NNT- RSI. Do you have any tips or strategy to get the most out of that combination of indicators in 1-minute scalping? Also adding this new indicator.
QuantraSystems
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@yfonticiella15, Glad to hear you appreciate our indicators! In regard to combining these indicators, there are almost an endless number of setups - but I can provide an example for a methodology you might consider as a starting point.
The Triple Confirmation Kernel Regression Overlay and Base work well to determine the broader trend direction - perhaps even on a higher timeframe than you intend to trade on. This could be the first 'filter.'
The NNT-RSI could then be used on your target timeframe to identify overbought or oversold zones - signaling potential reversal points. However, the idea would be to only take trades in the same direction as the broader trend - as previously determined using the KRO.
The final confirmation could then be the Scalper's Volatility Filter. If the SVF indicates a low-volatility period (i.e. a grey volatility line), any signals from the NNT-RSI can be ignored - the probability of this being a false signal is higher under these market conditions.
False signals are especially prevalent on lower timeframes.
But if the SVF indicators a strong market environment, this could be the green light to enter a trade!
// Please note, this was more so an example rather than a proven trading setup, and it was designed to provide an example of general trading practices.
Especially due to the fast-paced nature of scalping, flawless risk management is always the most important factor in a trading system - stop loss and take profit levels should nearly always be calculated prior to entering a trade.
It is also highly recommended to back test any trading system on historical data to better understand it's behavior - although past price behavior is never repeated exactly into the future, it is always important to determine a relative baseline and iron out any obvious flaws before any live trades are taken.
I hope you found this useful, and feel free to reach out again if you have any further questions!
yfonticiella15
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@QuantraAI, Your methodology is excellent and this is how I execute it only that I have made a modification in the NNT-RSI period. By default the indicator has a period of 14 and I changed it to 2, as indicated by Larry Connors' strategy. What do you think about the effectiveness of using the NNT-RSI with period 2?
Usually an RSI of period 2 gives me both the entry signal and the exit signal, anticipating the price and that is what I look for as confirmation with the NNT-RSI by changing its period to 2. As I have confirmed that NNT-RSI does not It precedes the price like other common RSIs and that is why I have had to look for other confirmations for the exit of my position. For example, in the backtesting that I have carried out I have verified that: The "composite kro" in the Base gives the trend change signal before the "signal wave" in The Kernel Regression Oscillator (KRO), can you confirm if this assessment is correct? So... my main indicator for trend is the "Base", although I look for its confluence with The Kernel Regression Oscillator (KRO).
I frequently do not operate with take profit but close manually to obtain the highest profitability, which is why I look for indicators that anticipate the price and give the exit signal indicating the change in trend. At the moment for my outputs the first filter is: the "Base" when it reaches overbought or oversold or when a vertical bar appears indicating that the price has reached an extreme value and the second filter is when volatility decreases.
The incorporation of the Scalper's Volatility Filter indicator has been essential in this methodology, since I found in backtesting that I was operating during low volatility hours, and that was affecting my operations. Regarding the Scalper's Volatility Filter, I have a question: if in 1 minute it indicates low volatility, with a gray line and in 3 minutes it indicates high volatility, with a line of another color, what temporality should I pay attention to or what signal is it more real/stronger, 3-minute high volatility or 1-minute low volatility?? Thank you very much in advance.
QuantraSystems
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@yfonticiella15, It is interesting to hear that we have similar trading approaches! It is great to see that you have a well-thought out and verifiable approach.
To address your questions: Using an RSI length of 2 can definitely offer faster entries, but of course at the cost of more false signals. So, as you mentioned as well, it is important to include further confirming criteria. For short term trading, a 2-period RSI is definitely an accepted methodology.
The base KRO indicator does tend to provide marginally quicker response times compared to its overlayed counterpart. The overlay was designed for smoothness, and using the base - you get the added benefit of seeing the component kernel regression oscillators. This can help align expectations for trend shifts, as the faster oscillator begins to cross the midline first.
When faced with conflicting volatility signals from the SVF (on the 1- and 3-minute charts), giving more weight to the higher timeframe measurement is advisable. The (note) 'slightly' higher timeframe measurement tends to provide a more stable and reliable measurement - reducing the likelihood of the indicator reacting to what might only be short-lived or insignificant volatility spikes on the 1-minute chart.
Thanks for sharing your thoughts!
yfonticiella15
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@QuantraAI, Thank you for your prompt response, your comment is gratefully appreciated, we will contitnue proving your indicators.